Insurance fraud costs you about $100-$150 a year — here's how ICBC is trying to prevent it

Workers examine cars at the ICBC damaged vehicle lot at the south end of the Queensborough Bridge in Richmond.NICK PROCAYLO
/ Vancouver Sun

Jasper Smith, owner of Due Diligence Canada, is an expert in fraud investigation.Steve Bosch
/ PNG

Staged accidents, torched cars, fake witnesses, double identities — they’re the stuff of great spy stories, but also examples of the fraud that has dogged the Insurance Corporation of B.C. and potentially cost its customers hundreds of millions of dollars each year.

Now, the insurer is looking to update its high-tech approach to fraud detection to help crack down on those abusing the system.

ICBC filed a request for information in December seeking “information on solutions for detecting insurance fraud schemes,” such as “software, statistical and predictive models and professional services to assist with implementing the solution.”

“It’s part of our work to update our fraud strategy and it will help us combat fraud further, with the help of the latest technology and using fraud analytics,” said ICBC spokeswoman Leslie Dickson.

ICBC’s Special Investigation Unit (SIU), charged with investigating suspected fraudulent claims and licensing, already includes intelligence and cyber divisions that use the Internet and social media to identify potential fraudulent activity.

But the company is also looking at new ways to stem an increase in injury claims, which it says totalled $1.9 billion in 2013 and is the reason behind an interim rate increase of about $3 per month per customer. ICBC’s application for the increase is under review by the B.C. Utilities Commission.

Dickson said it’s too early in the information-seeking process to have a budget and specifics about such a solution, but it may use “data and algorithms and statistical methods which can be used to detect and then further enhance our investigative methods when there are suspected instances.”

ICBC estimates fraud costs each of its 3.1 million customers between $100 and $150 each year.

Dickson said the insurer faces three major types of fraud: Organized fraud, such as fraud rings, staged accidents or stolen vehicle rings; pre-meditated fraud, such as false billing, torched vehicles, and impersonation or multiple identities; and opportunistic fraud, such as overstated injuries or damage that is unrelated to the crash being included in the claim.

The SIU is broken into two units — a claims unit with 61 staff and a driver licensing integrity and risk management unit with fewer than 10 staff.

While data for 2014 is still being compiled, in 2013, ICBC launched 4,500 investigations into claims and 6,000 investigations into licensing.

The SIU pursued charges of 38 offences against 35 defendants that year, Dickson said. The year-to-year conviction rate for such charges averages 90 per cent.

“We don’t know if the fraud trend is going up or down, in a nutshell,” she said.

“The vast majority of our customers are honest when they report details about their claims. But we do have an increase in fraudulent cases that we’ve investigated, and that’s a direct result of referrals we’ve had to our Special Investigation Unit from claims staff.”

Dickson said ICBC has long focused on combating fraud, but acquiring the new solution would bring it up-to-date with “best practices in the industry.”

“It’s not the be-all and end-all, or the final solution, to the fraud problem,” Jasper Smith, founder of Due Diligence Canada, said of using software to analyze data.

“But it’s a tool and it’s a good tool. Fraud is massive. On a North-American scale, you’re looking in the billions.”

Smith has been sub-contracted by ICBC as an investigator in the past and worked with many insurance companies in Eastern Canada.

He said his business does more of the “legwork” of fraud investigations — surveillance, trash pulls, undercover operations — but he expects more and more companies to seek out software solutions.

“It would be able to connect the dots much faster. It would spit out red flags of potential frauds. I personally think what ICBC is exploring is a good idea.”

Smith said data privacy is a concern, but in his experience, ICBC keeps its information “close to home.”

Using such tools for fraud detection has “been a journey for a long time for many companies,” said Ben Kosic, CEO of Canadian National Insurance Crime Services (CANATICS), a non-profit organization which uses state-of-the-art analytical tools to identify suspicious claims in pools of insurer data.

“They’ve been using the basic rules and some data mining and some predictive analytics. What’s starting to become more of the norm is the use of this network analysis and visualization to give contextual information to the investigator.”

Kosic said CANATICS is using a consortium approach that shares data among multiple insurers to draw out fraudsters who are hiding their identities, going between insurance companies and spreading their fraud out over time.

“What looks like an innocent accident — especially when it’s a staged collision and you lure an innocent victim into it — is very difficult to detect, but when I pool the data across multiple insurers, I start to see the bigger patterns.”

2013: A Surrey couple trying to avoid an $801 deductible for a collision was ordered to pay more than $200,000 after convincing a friend to pass himself off as a witness.

2012: A judge ordered 11 people and a company to pay about $850,000 for a scheme where 12 vehicles were reported stolen and then resold after insurance money was paid out on them.

2012: A Williams Lake man who drank, rolled his truck and then convinced a friend to say she was behind the wheel, bragged online about his big ICBC payout but was busted by the corporation’s Special Investigation Unit.

2009: Two Delta brothers were charged with 33 counts of fraud after ICBC found they had been buying used cars, setting back their odometers and selling them for a profit.

2008: Private eye Jasper Smith uncovered one of B.C.’s biggest driver-license scams, involving a driving school operator who with the help of an ICBC driving examiner sold about 200 licenses for $2,000 to $8,000 each.

The annual 10-day event attracts thousands of people — riders and fans — to the mountain resort

Vancouver Flyers

Comments

We encourage all readers to share their views on our articles and blog posts. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, and please keep your comments relevant and respectful. If you encounter a comment that is abusive, click the "X" in the upper right corner of the comment box to report spam or abuse. We are using Facebook commenting. Visit our FAQ page for more information.

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.